Blessed with the region’s only deep-water port, at the entrance to the world’s third-busiest shipping lane, Djibouti is transforming itself into an ultra-modern logistics centre with the launch of its International Free Trade Zone
The presence of Rwanda’s President Paul Kagame, Somalia’s President Mohamed Abdullahi Farmajo, Ethiopia’s Prime Minister Abiy Ahmed and the AU Commission’s Chairperson, Moussa Faki Mahamat, alongside Djibouti’s President Ismaïl Omar at the inauguration of the first phase of the Djibouti International Free Trade Zone (DIFTZ) in July 2018 attests to the importance regional leaders place on the scheme.
“Connected to Djibouti’s main ports,” said Djibouti’s Prime Minister Abdoulkader Kamil Mohamed, during the ceremony, “it is intended to diversify the Djiboutian economy, create jobs and attract investment by providing foreign companies with the high-quality logistical support essential to their operations.”
Located 23km from the city centre and covering an area of 4,800 hectares, the $3.5bn, 10-year DIFTZ project is projected to be the largest free trade zone in Africa.
Aboubaker Omar Hadi, the chairman of Djibouti Ports and Free Zones Authority (DPFZA), said at the event: “We are building a global, modern and sustainable trade hub for the coming decades. Djibouti’s strategic location makes it an important gateway to dynamic African markets.”
The DIFTZ Project Preparatory Group, which is in charge of the initiative, consists of DPFZA and three Chinese partners: China Merchants Group – which is already the biggest investor in Djibouti – Dalian Port Authority and IZP Technologies.
The project forms part of Beijing’s much trumpeted ‘Belt and Road’ strategy to develop transport infrastructure and industrial zones around Asia, Africa and beyond, to enable much greater trade between China and the rest of the world.
Until now, Djibouti has mainly acted as the entry and export point for China’s burgeoning manufacturing and processing investment in Ethiopia. Now Djibouti wants to take on the same role itself and its location on the Red Sea means shorter transport times for raw materials and the finished goods. The first phase, which involves $370m investment over a 240- hectare plot, consists of four industrial clusters focused on trade and logistics, export processing, and business and financial support services, as well as manufacturing and duty-free retail businesses.
Only one year after its launch, “eighty-one companies have already moved in, including trading and logistics businesses,” said Ali Ahmed Aouled, DIFTZ’s marketing director and head of public relations.
These companies come from around the world, including Ethiopia, Europe, the Middle East and China. With the Djibouti International Hotel and the Djibouti International Tower already in place, and planned connections to Doraleh Multipurpose Port, more international investors and businesses are expected to commit themselves soon.
Part of a vast project
Work is also underway on the Djibouti Damerjog Industrial Development (DDID), which will host heavy industrial tenants and the country’s second oil terminal. The role of the DDID is to build on Djibouti’s position as a logistics and commercial hub by attracting export-orientated businesses, while creating more jobs. “We have investors visiting every day who want to reserve a space in the zone,” confirms Siman Moussa, Senior Manager in the Project and Business Development department at the DDID.
In addition to its transport infrastructure, Djibouti hopes that foreign firms will be enticed to invest in the free zone by the country’s open investment regulations. “The free trade zone regime is particularly attractive,” says Aouled. “The sole restriction is that 30% of a company’s employees must be locals within five years, rising to 70% thereafter. This is how we will ensure the transfer of skills which will help to enhance the value of local human capital. Over time, the DIFTZ must play its part in the creation of 300,000 jobs.”
With a population of just under 1m, that underlines the venture’s ambition. Other port projects, such as Lamu in Kenya, will attempt to replicate the Djibouti model but DIFTZ’s Aouled is confident that Djibouti “is ten years ahead” of its potential competitors.